China Leading Global Race to Make Clean Energy

By KEITH BRADSHER, NY Times, January 30, 2010

TIANJIN, China — China vaulted past competitors in Denmark, Germany, Spain and the United States last year to become the world’s largest maker of wind turbines, and is poised to expand even further this year.

China has also leapfrogged the West in the last two years to emerge as the world’s largest manufacturer of solar panels. And the country is pushing equally hard to build nuclear reactors and the most efficient types of coal power plants.

These efforts to dominate renewable energy technologies raise the prospect that the West may someday trade its dependence on oil from the Mideast for a reliance on solar panels, wind turbines and other gear manufactured in China.

“Most of the energy equipment will carry a brass plate, ‘Made in China,’ ” said K. K. Chan, the chief executive of Nature Elements Capital, a private equity fund in Beijing that focuses on renewable energy.

President Obama, in his State of the Union speech last week, sounded an alarm that the United States was falling behind other countries, especially China, on energy. “I do not accept a future where the jobs and industries of tomorrow take root beyond our borders — and I know you don’t either,” he told Congress.

The United States and other countries are offering incentives to develop their own renewable energy industries, and Mr. Obama called for redoubling American efforts. Yet many Western and Chinese executives expect China to prevail in the energy-technology race.

Multinational corporations are responding to the rapid growth of China’s market by building big, state-of-the-art factories in China. Vestas of Denmark has just erected the world’s biggest wind turbine manufacturing complex here in northeastern China, and transferred the technology to build the latest electronic controls and generators.

“You have to move fast with the market,” said Jens Tommerup, the president of Vestas China. “Nobody has ever seen such fast development in a wind market.”

Renewable energy industries here are adding jobs rapidly, reaching 1.12 million in 2008 and climbing by 100,000 a year, according to the government-backed Chinese Renewable Energy Industries Association.

Yet renewable energy may be doing more for China’s economy than for the environment. Total power generation in China is on track to pass the United States in 2012 — and most of the added capacity will still be from coal.

China intends for wind, solar and biomass energy to represent 8 percent of its electricity generation capacity by 2020. That compares with less than 4 percent now in China and the United States. Coal will still represent two-thirds of China’s capacity in 2020, and nuclear and hydropower most of the rest.

As China seeks to dominate energy-equipment exports, it has the advantage of being the world’s largest market for power equipment. The government spends heavily to upgrade the electricity grid, committing $45 billion in 2009 alone. State-owned banks provide generous financing.

China’s top leaders are intensely focused on energy policy: on Wednesday, the government announced the creation of a National Energy Commission composed of cabinet ministers as a “superministry” led by Prime Minister Wen Jiabao himself.

Regulators have set mandates for power generation companies to use more renewable energy. Generous subsidies for consumers to install their own solar panels or solar water heaters have produced flurries of activity on rooftops across China.

China’s biggest advantage may be its domestic demand for electricity, rising 15 percent a year. To meet demand in the coming decade, according to statistics from the International Energy Agency, China will need to add nearly nine times as much electricity generation capacity as the United States will.

So while Americans are used to thinking of themselves as having the world’s largest market in many industries, China’s market for power equipment dwarfs that of the United States, even though the American market is more mature. That means Chinese producers enjoy enormous efficiencies from large-scale production.

In the United States, power companies frequently face a choice between buying renewable energy equipment or continuing to operate fossil-fuel-fired power plants that have already been built and paid for. In China, power companies have to buy lots of new equipment anyway, and alternative energy, particularly wind and nuclear, is increasingly priced competitively.

Interest rates as low as 2 percent for bank loans — the result of a savings rate of 40 percent and a government policy of steering loans to renewable energy — have also made a big difference.

As in many other industries, China’s low labor costs are an advantage in energy. Although Chinese wages have risen sharply in the last five years, Vestas still pays assembly line workers here only $4,100 a year.

China’s commitment to renewable energy is expensive. Although costs are falling steeply through mass production, wind energy is still 20 to 40 percent more expensive than coal-fired power. Solar power is still at least twice as expensive as coal.

The Chinese government charges a renewable energy fee to all electricity users. The fee increases residential electricity bills by 0.25 percent to 0.4 percent. For industrial users of electricity, the fee doubled in November to roughly 0.8 percent of the electricity bill.

The fee revenue goes to companies that operate the electricity grid, to make up the cost difference between renewable energy and coal-fired power.

Renewable energy fees are not yet high enough to affect China’s competitiveness even in energy-intensive industries, said the chairman of a Chinese industrial company, who asked not to be identified because of the political sensitivity of electricity rates in China.

Grid operators are unhappy. They are reimbursed for the extra cost of buying renewable energy instead of coal-fired power, but not for the formidable cost of building power lines to wind turbines and other renewable energy producers, many of them in remote, windswept areas. Transmission losses are high for sending power over long distances to cities, and nearly a third of China’s wind turbines are not yet connected to the national grid.

Most of these turbines were built only in the last year, however, and grid construction has not caught up. Under legislation passed by the Chinese legislature on Dec. 26, a grid operator that does not connect a renewable energy operation to the grid must pay that operation twice the value of the electricity that cannot be distributed.

With prices tumbling, China’s wind and solar industries are increasingly looking to sell equipment abroad — and facing complaints by Western companies that they have unfair advantages. When a Chinese company reached a deal in November to supply turbines for a big wind farm in Texas, there were calls in Congress to halt federal spending on imported equipment.

“Every country, including the United States and in Europe, wants a low cost of renewable energy,” said Ma Lingjuan, deputy managing director of China’s renewable energy association. “Now China has reached that level, but it gets criticized by the rest of the world.”

Obama vs. House GOP: Best TV ever

By the time Obama was done, and had stayed about 30 minutes past when he was scheduled to leave, Republican leadership was ready to get him out of the room. One GOP lawmaker asked for one more question, and as Obama started to say he was out of time, Pence jumped in, too: "He's gone way over." And with that, Obama took... his booklet of GOP policy proposals and left the

Before President Obama started speaking to the House Republican conference's retreat in Baltimore Friday, the GOP presented him with a little book, one that wrapped up all of the policy ideas they've had since he took office that have languished. It had a catchy title: "Better Solutions." The pamphlet may not be an ideal blueprint for governing -- it only takes 30 pages to wrap up everything from economic stimulus to national security to financial reform -- but, as it turned out, it did make for a pretty good prop.

Which Obama demonstrated about an hour into what was easily the most entertaining program C-SPAN (or any cable news network, really) has aired in a long time. "You say, for example, that we've offered a health care plan, and I look up -- this is just [in] the book that you've just provided me, 'Summary of GOP Health Care Reform Bill,'" Obama said, casually flipping through the book as Rep. Tom Price, R-Ga., stood by. Price had demanded the president tell Republicans how they should answer constituents who don't like the way the White House says the GOP hasn't offered any ideas. So Obama played it deadpan. '"The GOP plan will lower health care premiums for American families and small businesses, addressing America's number one priority for health reform.' I mean, that's an idea that we all embrace. But specifically it's got to work."

Two days after his feisty State of the Union speech, Obama's trip to the retreat started off slowly, with a speech that could have worked almost anywhere with only a few edits ahead of time. And then the question-and-answer session got started, and the event turned into a spectacle, the kind of thing that hasn't been seen in American politics in years -- and probably won't again, once the people responsible for putting it together go back to look at the video. (Which is too bad, because NBC does have an opening for a 10 p.m. show, and this was a lot more watchable than Leno.) Rarely has his administration done such a good job of bluntly underscoring the differences between what Obama wants to do and what Republicans would prefer if they had power. The president was funny and disarming, but he defended his policies fiercely, and he tiptoed up to the line of calling Republicans liars to their faces.

"We've got to close the gap a little bit between the rhetoric and the reality," he said. "I'm not suggesting that we're going to agree on everything ... but if the way these issues are being presented by the Republicans is that this is some wild-eyed plot to impose huge government in every aspect of our lives, what happens is you guys then don't have a lot of room to negotiate with me. I mean, the fact of the matter is is that many of you, if you voted with the administration on something, are politically vulnerable in your own base, in your own party. You've given yourselves very little room to work in a bipartisan fashion because what you've been telling your constituents is, 'This guy's doing all kinds of crazy stuff that's going to destroy America.'"

The ironic, detached style and professorial wonkiness that has sometimes made it hard for Obama to connect on a visceral level since he took office worked perfectly in Baltimore. And what could have been a dangerous event politically, with Republicans riding high in polls and Obama's agenda on its heels, turned into a presidential seminar, instead. He ridiculed a year's worth of Republican talking points on the stimulus: "The notion that I would somehow resist doing something that cost half as much but would produce twice as many jobs -- why would I resist that? I wouldn't ... It doesn't make sense if somebody could tell me, 'You could do this cheaper and get increased results,' that I wouldn't say, 'Great.' The problem is, I couldn't find credible economists who would back up the claims that you just made." When Rep. Mike Pence tried to push him to commit to "across the board tax cuts," Obama pointed out that the stimulus plan did cut taxes for millions of Americans -- but he couldn't resist twisting the knife a bit. "What you may consider across-the-board tax cuts could be, for example, greater tax cuts for people who are making a billion dollars," he said, tying his answer into the Democratic effort to paint Republicans as friends of the rich without blinking. "I may not agree to a tax cut for Warren Buffett. You may be calling for an across-the-board tax cut for the banking industry right now. I may not agree to that." He mocked the GOP for voting in lockstep against the stimulus bill, then trying to take credit for projects it funded: "A lot of you have gone to appear at ribbon cuttings for the same projects that you voted against." Sixty-eight of them, to be exact, according to the Democratic Congressional Campaign Committee.

GOP aides only agreed at the last minute to air the questions, and the lack of political polish made it seem like a freewheeling U.S. version of Britain's prime minister's questions. But on TV, the event played even more one-sided than it probably was in real life. Except Pence, who was on the stage with Obama, the other questions all came from disembodied voices in a dark hotel ballroom. Which worked all right for Republicans like Rep. Shelley Moore Capito of West Virginia, who basically just lobbed a softball about the economy. But when others tried to push Obama, the setup only helped him bat away their questions as they flew out of the darkness.

"What were the old annual deficits under Republicans have now become the monthly deficits under Democrats," said Rep. Jeb Hensarling, R-Texas (who Obama kept calling "Jim," for some reason). "You are soon to submit a new budget, Mr. President. Will that new budget, like your old budget, triple the national debt and continue to take us down the path of increasing the cost of government to almost 25 percent of our economy?"

The president laughed. "Jim, with all due respect, I've just got to take this last question as an example of how it's very hard to have the kind of bipartisan work that we're going to do, because the whole question was structured as a talking point for running a campaign," he said. "When we came into office, the deficit was $1.3 trillion. $1.3 trillion. So when you say that suddenly I've got ... a monthly deficit that's higher than the annual deficit left by Republicans, that's factually just not true, and you know it's not true."

The whole thing basically went like that: Republican asks obnoxious question rooted in Glenn Beck-ian talking points; Obama swats it away, makes the questioner look silly, and then smiles at the end. It got so bad, in fact, that Fox News cut away from the event before it was over. Democratic operatives around Washington watching it had pretty much the same reaction: "Where the hell has this guy been?" One source said GOP aides probably wished they'd spoken to John McCain "about what happened to him in the presidential debates" before they broadcast the event. "It's quite a show," a White House official said, apparently going for the same deadpan tone the president was.

Republican aides tried to argue that Obama was struggling to get past his initial talking points, but that was a pretty desultory attempt at spin. By the time Obama was done, and had stayed about 30 minutes past when he was scheduled to leave, Republican leadership was ready to get him out of the room. One GOP lawmaker asked for one more question, and as Obama started to say he was out of time, Pence jumped in, too: "He's gone way over." And with that, Obama took his booklet of GOP policy proposals and left the room -- in much better political shape, possibly, than he was when he walked in.

Watch the question-and-answer session here, if you missed it -- or if you just want to see it again:

Double Standard For Bernanke: Only 50 Votes Needed In Senate

Outrageous...

Ryan Grimm, Huffinton Post, January 26, 2010

When it comes to progressive priorities in the Senate, there's one standard: 60 votes are needed. But for Ben Bernanke, there's a second standard: 50 will be just fine, thank you.

Democratic leaders in the Senate are asking colleagues who are reluctant to support Bernanke's nomination for a second term as Federal Reserve chairman to nevertheless vote with them to end a filibuster and allow a vote on the actual nomination. The reluctant members would then be free to vote no to express their displeasure. Several Democrats have committed to just that and others are considering it.

The public health insurance option was stripped from health care reform because it didn't have 60 votes. An expansion of Medicare took its place but it, too, was dropped for having fewer than 60. Both proposals had at least 50 votes. Dawn Johnsen, a nominee to head the Office of Legal Counsel, has the backing of progressive organizations, but a 60-vote threshold has held her up for a year.

Sen. Dick Durbin (D-Ill.) told reporters on Monday afternoon after a meeting with Bernanke that some opponents of the chairman had pledged to support him on the first vote, but not on the second.

"I know that there are some Democrats who have stated publicly that they are not going to vote ultimately for his nomination as chairman of the Fed. Many, not all, but many of these Senate Democrats have said that they won't stop us on procedural votes. So we may have their support on cloture but not on final passage," he said.

HuffPost asked Durbin why they'd make that commitment for Bernanke but not for health care.

"I don't know. That's a good question. They come up with different standards in terms of how they do things," Durbin replied. "By and large, I will say, and I think Harry Reid and the leadership would agree, that with very few exceptions, the Democratic senators have stood behind us on procedural votes. And we expect them to. We ask them to."

Except on health care, the president's signature domestic legislation and a major plank in the Democratic platform for more than half a century.

Story continues below

"On health care, there were some exceptions," Durbin said, in something of an understatement. "There's no question about it. That's what made the job so difficult."

Sen. Barbara Boxer (D-Calif.), who announced her opposition to Bernanke on Friday, has committed to vote for cloture -- in other words, to vote to end a filibuster, her spokeswoman told HuffPost. She will then vote against him on final passage.

Sen. Jeff Merkley (D-Oregon) has been consistently opposed to Bernanke and told HuffPost that he'll vote against cloture, as well, meaning that he'll be opposing Bernanke in both of his votes rather than having it both ways. Asked why some of his colleagues considered the cloture vote critical on health care but not on Bernanke, he paused and smiled. "I don't know," he said.

Sen. Pat Leahy (D-Vt.) said that he spent a lot of time recently talking with his home state colleague, Sen. Bernie Sanders (I-Vt.), a Bernanke opponent, but hadn't decided whether to oppose the chairman's reconfirmation.

But, he added, "I don't believe in filibusters on nominees."

Leahy, the Judiciary Committee chairman, has a consistent record opposing filibusters on nominees, but some of his other colleagues have more situational ethics when it comes to so-called "procedural" votes.

Casting a vote for cloture -- which ends a filibuster -- but against final passage lets a senator have it both ways. Voters back home can be told the senator stood in opposition, even when they didn't actually stand in the way.

In case of a 50-50 vote, Vice President Joe Biden can break the tie.

It gets complicated enough that even Leahy, who's been in the Senate since 1975, can get confused.

"I'd be disinclined to vote against cloture," he said, then paused, wondering if he had all the negatives straight. "I'd be inclined to vote for cloture," he clarified. Sort of.

Thomas Jefferson on Democracy versus corporations

“I hope we shall... crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and to bid defiance to the laws of our country.” -- Thomas Jefferson

The Court’s Blow to Democracy

The Citizens United ruling is likely to be viewed as a shameful bookend to Bush v. Gore. With one 5-to-4 decision, the court’s conservative majority stopped valid votes from being counted to ensure the election of a conservative president. Now a similar conservative majority has distorted the political system to ensure... that Republican candidates will be at an enormous advantage in future elections

NY Times Editorial, January 22, 2002

With a single, disastrous 5-to-4 ruling, the Supreme Court has thrust politics back to the robber-baron era of the 19th century. Disingenuously waving the flag of the First Amendment, the court’s conservative majority has paved the way for corporations to use their vast treasuries to overwhelm elections and intimidate elected officials into doing their bidding.

Congress must act immediately to limit the damage of this radical decision, which strikes at the heart of democracy.

As a result of Thursday’s ruling, corporations have been unleashed from the longstanding ban against their spending directly on political campaigns and will be free to spend as much money as they want to elect and defeat candidates. If a member of Congress tries to stand up to a wealthy special interest, its lobbyists can credibly threaten: We’ll spend whatever it takes to defeat you.

The ruling in Citizens United v. Federal Election Commission radically reverses well-established law and erodes a wall that has stood for a century between corporations and electoral politics. (The ruling also frees up labor unions to spend, though they have far less money at their disposal.)

The founders of this nation warned about the dangers of corporate influence. The Constitution they wrote mentions many things and assigns them rights and protections — the people, militias, the press, religions. But it does not mention corporations.

In 1907, as corporations reached new heights of wealth and power, Congress made its views of the relationship between corporations and campaigning clear: It banned them from contributing to candidates. At midcentury, it enacted the broader ban on spending that was repeatedly reaffirmed over the decades until it was struck down on Thursday.

This issue should never have been before the court. The justices overreached and seized on a case involving a narrower, technical question involving the broadcast of a movie that attacked Hillary Rodham Clinton during the 2008 campaign. The court elevated that case to a forum for striking down the entire ban on corporate spending and then rushed the process of hearing the case at breakneck speed. It gave lawyers a month to prepare briefs on an issue of enormous complexity, and it scheduled arguments during its vacation.

Chief Justice John Roberts Jr., no doubt aware of how sharply these actions clash with his confirmation-time vow to be judicially modest and simply “call balls and strikes,” wrote a separate opinion trying to excuse the shameless judicial overreaching.

The majority is deeply wrong on the law. Most wrongheaded of all is its insistence that corporations are just like people and entitled to the same First Amendment rights. It is an odd claim since companies are creations of the state that exist to make money. They are given special privileges, including different tax rates, to do just that. It was a fundamental misreading of the Constitution to say that these artificial legal constructs have the same right to spend money on politics as ordinary Americans have to speak out in support of a candidate.

The majority also makes the nonsensical claim that, unlike campaign contributions, which are still prohibited, independent expenditures by corporations “do not give rise to corruption or the appearance of corruption.” If Wall Street bankers told members of Congress that they would spend millions of dollars to defeat anyone who opposed their bailout, and then did so, it would certainly look corrupt.

After the court heard the case, Senator John McCain told reporters that he was troubled by the “extreme naïveté” some of the justices showed about the role of special-interest money in Congressional lawmaking.

In dissent, Justice John Paul Stevens warned that the ruling not only threatens democracy but “will, I fear, do damage to this institution.” History is, indeed, likely to look harshly not only on the decision but the court that delivered it. The Citizens United ruling is likely to be viewed as a shameful bookend to Bush v. Gore. With one 5-to-4 decision, the court’s conservative majority stopped valid votes from being counted to ensure the election of a conservative president. Now a similar conservative majority has distorted the political system to ensure that Republican candidates will be at an enormous advantage in future elections.

Congress and members of the public who care about fair elections and clean government need to mobilize right away, a cause President Obama has said he would join. Congress should repair the presidential public finance system and create another one for Congressional elections to help ordinary Americans contribute to campaigns. It should also enact a law requiring publicly traded corporations to get the approval of their shareholders before spending on political campaigns.

These would be important steps, but they would not be enough. The real solution lies in getting the court’s ruling overturned. The four dissenters made an eloquent case for why the decision was wrong on the law and dangerous. With one more vote, they could rescue democracy.

Bankers Without a Clue

Well, if you were hoping for a Perry Mason moment — a scene in which the witness blurts out: “Yes! I admit it! I did it! And I’m glad!” — the hearing was disappointing. What you got, instead, was witnesses blurting out: “Yes! I admit it! I’m clueless!”

By PAUL KRUGMAN

Published: January 14, 2010

The official Financial Crisis Inquiry Commission — the group that aims to hold a modern version of the Pecora hearings of the 1930s, whose investigations set the stage for New Deal bank regulation — began taking testimony on Wednesday. In its first panel, the commission grilled four major financial-industry honchos. What did we learn?

Well, if you were hoping for a Perry Mason moment — a scene in which the witness blurts out: “Yes! I admit it! I did it! And I’m glad!” — the hearing was disappointing. What you got, instead, was witnesses blurting out: “Yes! I admit it! I’m clueless!”

O.K., not in so many words. But the bankers’ testimony showed a stunning failure, even now, to grasp the nature and extent of the current crisis. And that’s important: It tells us that as Congress and the administration try to reform the financial system, they should ignore advice coming from the supposed wise men of Wall Street, who have no wisdom to offer.

Consider what has happened so far: The U.S. economy is still grappling with the consequences of the worst financial crisis since the Great Depression; trillions of dollars of potential income have been lost; the lives of millions have been damaged, in some cases irreparably, by mass unemployment; millions more have seen their savings wiped out; hundreds of thousands, perhaps millions, will lose essential health care because of the combination of job losses and draconian cutbacks by cash-strapped state governments.

And this disaster was entirely self-inflicted. This isn’t like the stagflation of the 1970s, which had a lot to do with soaring oil prices, which were, in turn, the result of political instability in the Middle East. This time we’re in trouble entirely thanks to the dysfunctional nature of our own financial system. Everyone understands this — everyone, it seems, except the financiers themselves.

There were two moments in Wednesday’s hearing that stood out. One was when Jamie Dimon of JPMorgan Chase declared that a financial crisis is something that “happens every five to seven years. We shouldn’t be surprised.” In short, stuff happens, and that’s just part of life.

But the truth is that the United States managed to avoid major financial crises for half a century after the Pecora hearings were held and Congress enacted major banking reforms. It was only after we forgot those lessons, and dismantled effective regulation, that our financial system went back to being dangerously unstable.

As an aside, it was also startling to hear Mr. Dimon admit that his bank never even considered the possibility of a large decline in home prices, despite widespread warnings that we were in the midst of a monstrous housing bubble.

Still, Mr. Dimon’s cluelessness paled beside that of Goldman Sachs’s Lloyd Blankfein, who compared the financial crisis to a hurricane nobody could have predicted. Phil Angelides, the commission’s chairman, was not amused: The financial crisis, he declared, wasn’t an act of God; it resulted from “acts of men and women.”

Was Mr. Blankfein just inarticulate? No. He used the same metaphor in his prepared testimony in which he urged Congress not to push too hard for financial reform: “We should resist a response ... that is solely designed around protecting us from the 100-year storm.” So this giant financial crisis was just a rare accident, a freak of nature, and we shouldn’t overreact.

But there was nothing accidental about the crisis. From the late 1970s on, the American financial system, freed by deregulation and a political climate in which greed was presumed to be good, spun ever further out of control. There were ever-greater rewards — bonuses beyond the dreams of avarice — for bankers who could generate big short-term profits. And the way to raise those profits was to pile up ever more debt, both by pushing loans on the public and by taking on ever-higher leverage within the financial industry.

Sooner or later, this runaway system was bound to crash. And if we don’t make fundamental changes, it will happen all over again.

Do the bankers really not understand what happened, or are they just talking their self-interest? No matter. As I said, the important thing looking forward is to stop listening to financiers about financial reform.

Wall Street executives will tell you that the financial-reform bill the House passed last month would cripple the economy with overregulation (it’s actually quite mild). They’ll insist that the tax on bank debt just proposed by the Obama administration is a crude concession to foolish populism. They’ll warn that action to tax or otherwise rein in financial-industry compensation is destructive and unjustified.

But what do they know? The answer, as far as I can tell, is: not much.

Banks Set for Record Pay

Greetings note: I am wondering how quickly the banksters are rushing all of their bonus money to Haiti. That $145 billion could help that country immensely. And I doubt the banksters need it that much.

Top 38 Firms on Pace to Award $145 Billion for '09, Up 18%, WSJ Study Finds

BY STEPHEN GROCER

Major U.S. banks and securities firms are on pace to pay their people about $145 billion for 2009, a record sum that indicates how compensation is climbing despite fury over Wall Street's pay culture.

An analysis by The Wall Street Journal shows that executives, traders, investment bankers, money managers and others at 38 top financial companies can expect to earn nearly 18% more than they did in 2008—and slightly more than in the record year of 2007. The conclusions are based on an examination of securities filings for the first nine months of 2009 and revenue estimates through year-end.

The Show Must Not Go On

Asking those responsible why it happened won't get answers. Only the retrieval of documents and other true investigative procedures will. I hope these folks have those skills.

New York Times Editorial, Jan. 17, 2010

Political theater and public scolding are good ways to draw attention to important issues and bad behavior, and Phil Angelides, chairman of the Financial Crisis Inquiry Commission, made use of both last week. As he swore in four of the nation’s top bankers, it was impossible not to think of that famous scene with executives from the tobacco industry. During the questioning, he rebuked Lloyd Blankfein, head of Goldman Sachs, for his firm’s practice of selling mortgage-related securities and at the same time betting they would fall in value.

Now that he has everyone’s attention, Mr. Angelides and his fellow commissioners can get to the hard part.

Inconclusive sparring at hearings will not fulfill the mandate Congress gave the panel to investigate the causes of the crisis. Indeed, the bankers who testified last week did not say much they had not said before.

The commission must uncover what bankers, investors, government officials and other people in positions of power, past and present, would prefer not to say — or perhaps do not know or understand — about the crash and the bailouts. The primary aim is not to air issues and foster debate, but to test views, resolve contradictions and arrive at evidence-based conclusions.

Yet the commission — which is supposed to file a final report by Dec. 15 — has not issued a single subpoena for documents. Instead, investigators have apparently been relying on voluntary cooperation, public records and information-sharing agreements that have been negotiated with federal agencies. A thorough investigation requires source documents that reveal what people were thinking and doing at the time of the events and that illuminate, buttress or contradict testimony.

Take, for example, Mr. Blankfein’s explanation that the clients Goldman bet against were sophisticated investors who demanded the doomed securities that Goldman sold them. Apart from the fact that the notion of “sophisticated investors” has been discredited by the crisis, does that explanation go far enough?

Without peering into the internal workings of Goldman and other financial firms that engaged in similar practices, it is hard to know how far bankers went in creating demand rather than responding to it, or if the securities were purposely designed to perform poorly.

The answers could cast light on when Wall Street practices cross the line from prudent hedging to excessive speculation.

A crucial related issue is whether Wall Street’s role as the underwriter of securities, which implies a level of approval of the investments being offered for sale, misled investors into buying questionable securities, and thus contributed to the credit bubble. If so, that would make the argument for barring too-big-to-fail banks from operating hedge funds all the more compelling.

Given the stakes, the chances seem remote that Wall Street will voluntarily hand over the papers that could get to the bottom of it all.

The inquiry is getting under way at a critical moment. The House has passed a financial regulatory reform bill that was enfeebled in important respects by bank lobbyists. The Senate banking committee recently rejected a generally robust proposal by Senator Christopher Dodd. It has yet to produce an alternative, but it is likely that lobbying and partisan politics will generate a weak bill. President Obama’s call for a new tax on big banks is a good idea, but must not pre-empt other needed changes, including a tax on bankers’ bonuses and more direct regulation to limit the size of financial firms.

Serious investigative work is the only way to counter the banks’ political power and alter the course of a reform effort that is headed in the wrong direction.

A Wake Up Call

by Robert Kuuttner, Salon.com

How could the health care issue have turned from a reform that was going to make Barack Obama ten feet tall into a poison pill for Democratic senators? Whether or not Martha Coakley squeaks through in Massachusetts on Tuesday, the health bill has already done incalculable political damage and will likely do more. Polls show that the public now opposes it by margins averaging ten to fifteen points, and widening. It is hard to know which will be the worse political defeat -- losing the bill and looking weak, or passing it and leaving it as a piñata for Republicans to attack between now and November.

The measure is so unpopular that Republican State Senator Scott Brown has built his entire surge against Coakley around his promise to be the 41st senator to block the bill -- this in Ted Kennedy's Massachusetts. He must be pretty confident that the bill has become politically radioactive, and he's right.

It has already brought down Senator Byron Dorgan of North Dakota, a fighter for health care and other reforms far more progressive than President Obama's. Dorgan championed Americans' right to re-import cheaper prescription drugs from Canada, a popular provision that the White House blocked. Dorgan, who is one of the Senate's great populists, began the year more than twenty points ahead in the polls of his most likely challenger, North Dakota Governor John Hoeven. By the time he decided to call it a day, Dorgan was running more than twenty points behind. The difference was the health bill, which North Dakotans oppose by nearly two to one. The fact that Dorgan's own views were much better than the Administration's cut little ice. He was fatally associated with an unpopular bill.

So, how did Democrats get saddled with this bill? Begin with Rahm Emanuel. The White House chief of staff, who was once Bill Clinton's political director, drew three lessons from the defeat of Clinton-care. All three were wrong. First, get it done early (Clinton's task force had dithered.) Second, leave the details to Congress (Clinton had presented Congress with a fully-baked cake.) Third, don't get on the wrong side of the insurance and drug industries (The insurers' fictitious couple, Harry and Louise, had cleaned Clinton's clock.)

But as I wrote in Obama's Challenge, in August 2008, it would be a huge mistake to try to get health care done right out of the box. Obama first needed to get his sea-legs, and focus like a laser on economic recovery. If he got the economy back on track, he would then have earned the chops to undertake more difficult structural reforms like health care.

Deferring to the House and Senate was fine up to a point, but this was an issue where the president needed to lead as only presidents can -- in order to frame the debate and define the stakes.

Cutting a deal with the insurers and drug companies, who are not exactly candidates to win popularity contests, associated Obama with profoundly resented interest groups. This was exactly the wrong framing. This battle should have been the president and the people versus the interests. Instead more and more voters concluded that it was the president and the interests versus the people.

As policy, the interest-group strategy made it impossible to put on the table more fundamental and popular reforms, such as using Federal bargaining power to negotiate cheaper drug prices, or having a true public option like Medicare-for-all. Instead, a bill that served the drug and insurance industries was almost guaranteed to have unpopular core elements.

The politics got horribly muddled. By embracing a deal that required the government to come up with a trillion dollars of subsidy for the insurance industry, Obama was forced to pursue policies that were justifiably unpopular -- such as taxing premiums of people with decent insurance; or compelling people to buy policies that they often couldn't afford, or diverting money from Medicare. He managed to scare silly the single most satisfied clientele of our one island of efficient single-payer health insurance -- senior citizens -- and to alienate one of his most loyal constituencies, trade unionists.

The bill helped about two-thirds of America's uninsured, but did almost nothing for the 85 percent of Americans with insurance that is becoming more costly and unreliable by the day -- except frighten them into believing that what little they have is at increased risk of being taken away.

All of this made things easier for the right, and left people to take seriously even preposterous allegations such as the nonsense about death panels. It got so ass-backwards that the other day Ben Nelson, who successfully held out for anti-abortion language and a sweetheart deal for Nebraska's Medicaid as the price of his vote, found himself facing a wholesale voter backlash.

Nelson began running TV spots assuring Nebraska voters that the Obama health plan is "not run by the government." That's one hell of a slogan for a party that relies on democratically elected government to offset the insecurity, inequality and insanity generated by private commercial forces. If not-run-by-government is the Democrats' credo, why bother?

So we went from a politics in which government is necessary to provide secure health insurance -- because the private insurance industry skims off outrageous middlemen fees and discriminates against sick people -- to a politics in which Democrats, as a matter of survival, feel they have to apologize for government. Thank you, Rahm Emanuel.

The budget-obsessives around Obama also insisted that most of the bill not take effect until 2013, so that all of the scary stuff gets three years to fester before most people see any benefit. Call it political malpractice.

Finally, the health insurance battle sucked out all the oxygen. When Obama made time to work the phones personally, it wasn't to enact serious financial reform (this was left to the tender mercies of Tim Geithner) or to fight for a real jobs program (deficit hawks Peter Orszag and Larry Summers got to blunt that one). No -- Obama got on the phone and met with legislators to round up the last vote or two for a sketchy health reform that crowded out far more urgent issues.

As a resident of Massachusetts, in the last two days I've gotten robo calls from Barack Obama, Joe Biden, Bill Clinton, Martha Coakley, and Angela Menino, the wife of Boston's mayor -- everyone but the sainted Ted Kennedy. In Obama's call, he advised me that he needed Martha Coakley in the Senate, "because I'm fighting to curb the abuses of a health insurance industry that routinely denies care." Let's see, would that be the same insurance industry that Rahm was cutting inside deals with all spring and summer? The same insurance industry that spent tens of millions on TV spots backing Obama's bill as sensible reform?

If voters are wondering which side this guy is on, he has given them good reason.

Looking forward, one can imagine several possibilities. Suppose Coakley loses. Obama and the House leadership may then decide that their one shot to salvage health reform after all this effort is for the House to just pass the Senate-approved bill and send it to the president's desk. They can fix its deficiencies later. This is an easy parliamentary move. But the bill passed the House by only five votes; many House members are dead set against some of the more objectionable provisions of the Senate bill; a Coakley loss would make the bill that much more politically toxic; there will be Republican catcalls that Congress is using dubious means to pass a bill that has just been politically repudiated; and the House votes just may not be there this time.

Alternatively, let's say Coakley narrowly wins, the Democrats have a near death experience, and the House and Senate stop squabbling and pass the damned bill.

Either way, the Massachusetts surprise should be a wake-up call of the most fundamental kind. Obama needs to stop playing inside games with bankers and insurance lobbyists, and start being a fighter for regular Americans. Otherwise, he can kiss it all goodbye.

Robert Kuttner is co-editor of The American Prospect, a senior fellow at Demos, and author of Obama's Challenge.

Former Tennessee congressman Harold Ford Jr.'s northern exposure

Ford's investor-friendly positions as chairman of the centrist Democratic Leadership Council make him an ideal vehicle to protest Obama's "fat cat" insults and Schumer's post-crisis interest in financial regulation. Is that what you're looking for, New York?

By Jason Horowitz
Washington Post Staff Writer
Friday, January 15, 2010; C01

Harold Ford Jr. has gone viral.

"You can judge from the editorials in the city, and just the response in the city and in the state that people don't want party bosses telling anyone that you can't run," Ford said in a phone interview between meetings in New York on Thursday afternoon. "People want an independent strong voice representing New York in the Senate."

The former Tennessee congressman has reintroduced himself as public muller of a primary challenge against New York's low-polling junior senator, Kirsten Gillibrand (D). Ford has resided in New York for less time than many of the grad students taking his "political reality" class at New York University and he has no discernible support from the Democratic establishment. His conservative record on gay rights, abortion and gun control is so out of step with the party's primary voters that it makes Gillibrand's right-leaning record look progressive. Ford, the son of Tennessee's first black congressman, took a job as a Bank of America Merrill Lynch executive, and has cultivated a core constituency of Wall Street donors, many of whom are frustrated with President Obama's regulatory crackdown and what they see as a sudden cold shoulder from Sen. Chuck Schumer. Yet for all those moneyed ties, Ford has raised nothing -- literally, zilch -- to rival the millions of dollars in Gillibrand's coffers.

But as a shoestring publicity campaign for the Harold Ford brand, his 2010 media blitz has all been something to behold.

The New York political media, famished for a competitive political contest, has been more than willing to entertain this outsider as a potential contender for Gillibrand's seat. Ford, a talented 39-year-old with a book, titled "More Davids Than Goliaths," coming out a few weeks before the U.S. Senate primary this September, has cast his nascent primary challenge as that of a principled Democratic insurgent, staring down Schumer and Obama administration officials who have protected Gillibrand from opponents in the party.

In the interview, Ford said that the notion that he was doing this for publicity was "insulting to voters."

New Yorkers, he said, deserve a candidate who would fight for their interests, tax breaks and a health-care overhaul beneficial to the state, which he believes is not being done now. "Independence and jobs" were his echoing watchwords. "That's not about publicity," Ford said "That's real."

So, too, is the tacit approval of New York Mayor Michael Bloomberg, who privately boosted Caroline Kennedy's Senate bid after Hillary Clinton was appointed secretary of state. A year later, Bloomberg appears less invested though decidedly comfortable with letting his loyal operatives make a few bucks; his pollster Doug Schoen and campaign manager Bradley Tusk are advising Ford.

Like Bloomberg, Ford defends Wall Street bonuses as critical to the city's tax base. When asked in the interview whether he himself had received a bonus from his employer, his spokesman, Davidson Goldin, interrupted, as he did on other topics not related to Ford's rationale for running, which the media handler understood to be the sole focus of the interview. At that point in the interview, Ford stayed silent, but Goldin later offered that Ford's "salary is set by contract."

While Ford refused to compare himself to politicians who ultimately dropped their primary bids against Gillibrand, he acknowledged that his has been received differently.

"Maybe it's the benefit of time. People have had the opportunity to experience some of the policies passed in Washington," said Ford, adding, "and there is dissatisfaction with Senator Gillibrand."

Gillibrand, who has sat back and waited for intervention on her behalf from Schumer or the White House, is getting more involved.

"The notion that 'Tennessee' Harold Ford is an independent outsider is completely contrived," said Jefrey Pollock, Gillibrand's political adviser. "But his extreme views against reproductive rights, against marriage equality and against immigration are all too real. Kirsten Gillibrand is not backing down from this fight."

* * *

For Ford's rebel rationale to have any credibility, he needed a villain. He found one in Schumer, his former benefactor who raised money and campaigned for Ford during his narrow defeat to Bob Corker in the 2006 U.S. Senate race in Tennessee. Schumer has successfully swatted away Gillibrand's would-be primary challengers, and Ford argued that party pressure on him not to run "exacerbated" the situation and sped up his timetable.

"The only person Chuck Schumer has to blame is himself and his fellow Washington insiders for having the gall to interfere with a free election," said Goldin, Ford's spokesman. "And for blocking an independent Democrat from running."

But according to a source in Schumer's office familiar with conversations between Schumer and Ford, the senator called Ford after a November Politico story reported that the Memphis native was exploring his chances against Gillibrand. They agreed to a face-to-face meeting to discuss Ford's New York political future. But on the morning of the meeting, the New York Times reported that Ford was "weighing" a challenge to Gillibrand. In the days that followed, the Times reported the substance of the meeting under the headline "Schumer Urges Ford Not to Run."

"The only person the senator has talked to about Ford not running was Ford himself," said a person close to Schumer, who was granted anonymity to discuss the private conversations. The Schumer intimate suggested that Ford exploited his meeting with Schumer to build up his insurgent story line.

"He has not talked to anyone else because he has no interest in feeding this David-versus-Goliath fairy tale that seems to be the only thing the Ford campaign has going for it right now," the person close to Schumer said.

The Ford camp denies any such setup.

The White House and leaders in Washington have been less careful about fueling the Ford phenomenon. During a White House briefing on Jan. 11, press secretary Robert Gibbs reiterated the administration's support for Gillibrand. But then by telling reporters to "stay tuned" for administration efforts to knock Ford out, Gibbs may have unwittingly boosted Ford's status as an anti-establishment comer.

On Jan. 12, Ford sat down again for dinner with Schoen, the Bloomberg pollster, at the apartment of Richard Plepler, an HBO executive who is taking a leading role in promoting Ford's potential candidacy, according to a source with knowledge of the dinner who was granted anonymity to speak of the private meeting. Ford has also kept in daily touch with Tusk, Bloomberg's reelection manager.

"I'm involved a lot and Mayor Bloomberg is not," said Tusk, who said he is providing free advice for now but would sign on with Ford if he runs. As might be expected in New York politics, Tusk is himself a former aide to Schumer. "I deeply admire and respect Chuck and always have," he said. "But Gillibrand is her own entity."

Tusk argued that while Ford is not a household name among regular New York voters yet, he "has the ability to be known. The ability to raise money and the ability, clearly, to do press."

* * *

The one constituency with whom Ford does have high name-recognition is the city's top Democratic bundlers. "At least among my friends, Harold has an extremely strong base," said Orin Kramer, an investor at Boston Provident whose early support for Obama imbued him with gravity in the New York donor firmament. While Ford has yet to raise a cent for the race, Kramer said he would have financial support if he in fact ran.

"People regard him quite properly as an extraordinary political talent," Kramer said.

"We bonded with him years ago and he is one of our friends," said Robert Zimmerman, another influential fundraiser and Democratic National Committeeman. But according to several of these bundlers, it's not all about friendship. A show of support for Ford's potential candidacy also sends a message to Washington.

Ford's investor-friendly positions as chairman of the centrist Democratic Leadership Council make him an ideal vehicle to protest Obama's "fat cat" insults and Schumer's post-crisis interest in financial regulation.

"Mr. President, you did what you need to do, we now have to do what we have to do," said one prominent member of New York's Democratic donor universe, who was granted anonymity to freely reflect the sentiments of his peers. The donor said Wall Street needed to elect Ford as a "champion for New York's economy and financial services sector," because Schumer "is preoccupied with being majority leader and a national leader, and our junior senator is a second vote for Chuck."

("Nobody stands up for New York's economy more than Senator Schumer," said Schumer spokesman Brian Fallon. "But that doesn't mean doing whatever the banks want even when they're wrong.")

Many of these donors are simply underwhelmed by Gillibrand, whose garrulousness is much noted, and have not embraced her as they did Clinton before her. Gillibrand has expressed irritation at her inability to crack into the uppermost echelons of the fundraising circuit, namely into the sprawling Fifth Avenue apartment of the first couple in Democratic Party fundraising, Steven Rattner and Maureen White.

Rattner, the Bloomberg confidant and money manager, former Obama car czar and Times reporter who remains close with the paper's owner, Arthur Sulzberger, has gushed about Ford in print. According to one Gillibrand supporter, the senator has ascribed the reason for her discord with the couple to a broken-off relationship with White's younger brother more than a decade ago.

"If I got mad at every girlfriend one of my five brothers ever dated, I'd be mad at a lot of people," White said. "The only relevant part of that story is I've known her longer than most people.

"I'm not enthusiastic about Kirsten for a very simple reason," White continued, "New York State needs someone great. It's not clear to me that she has the talent to follow in the footsteps of Robert Kennedy, Daniel Patrick Moynihan or Hillary Clinton."

If Ford gets elected, White said, "he'll be a national presence for New York State from day one."

* * *

In 2006, Schumer, then chairman of the Democratic Senatorial Campaign Committee and architect of the Democratic takeover of the chamber, recruited Ford as the nominee to fill the seat vacated by Tennessee's Bill Frist. Schumer called him "a great candidate" and helped Ford raise millions of dollars for a bruising and tight contest against Corker, a Republican. The contest is perhaps most remembered for a racially charged ad aired by the Republican Party at the end of the election, in which a winking blonde said she met the unmarried Ford at a Playboy party. Schumer released funds to keep Ford ads airing on television until Election Day. But he fell just short.

Soon after his defeat, Ford started spending substantial time in New York City and became an official resident in 2008. Like Bloomberg, he got to know the benefit circuit, squiring around his now-wife, Emily Threlkeld, an executive with the fashion designer Carolina Herrera and the stepdaughter of Wall Street grandee Anson Beard -- as well as the table-hopping nightspots, like Graydon Carter's Waverly Inn.

An interview in the New York Times on Jan. 13 revealed the chasm between Ford and his recession-weary constituents more starkly. He preferred the Giants over the Jets because he was closer to their owner. He had been to Staten Island only by helicopter. He got pedicures.

For now, at least, Ford is counting on media interest in a competitive race and the strength of his anti-establishment message to keep his campaign going, whatever the ultimate goal.

"I'm considering it more and more seriously every day," he said.

The Case Against Geithner

by Dylan Ratigan, Huffington Post

As we sit here today, Wall Street continues to exploit a policy of government-sponsored giveaways and secrecy to pay themselves billions.

Record-setting bonuses due to banks like Goldman Sachs as early next week.

Yet instead of acting as our cop, Secretary Tim Geithner has become central to what may be a cover-up of the greatest theft in U.S. history.

Here is the evidence.

COUNT 1: The AIG Emails:

Recently-released emails show Geithner's New York Federal Reserve Bank directing AIG to keep details of the 100-cents-on-the-dollar bailout secret in 2008 -- A reversal of the traditional role of government, which is to force companies to become more transparent, not less.

A Treasury Spokeswoman says: "Secretary Geithner played no role in these decisions and indeed, by November 24, he was recused from working on issues involving specific companies, including AIG."

Friday, the White House also defended the Treasury Secretary:

Gibbs: These decisions did not rise to his level at the fed.

CNN's Ed Henry: How do you know that he wasn't involved? He was the leader of the New York Fed.

Gibbs: Right, but he wasn't on the emails that have been talked about and wasn't party to the decision that was being made.

He wasn't party to a decision to hide $62 billion dollar payouts to firms that became insolvent during his 5-year watch at the New York Fed?

Congressman Darrell Issa speculates that maybe Geithner wasn't on the emails in question because his people felt so strongly they already knew their boss's intentions, they didn't feel the need to bother him with the details.

COUNT 2: He wasn't even a regulator!

In Geithner's own words during confirmation hearings in March:

"First of all, I've never been a regulator...I'm not a regulator."

According to the New York fed bank's website, that was your job!! And I quote from the Fed's website: "As part of our core mission, we supervise and regulate financial institutions in the Second District."

That district of course is the epicenter for bailed out banks and billion dollar bonuses.

Count 3: "The Christmas Eve Taxpayer Massacre."

As you were wrapping those last presents, Geithner's Treasury Department lifted the 400-billion dollar cap on taxpayer responsibility for potential losses for Fannie Mae and Freddie Mac.

The new cap? Unlimited taxpayer funds! Interesting timing... Christmas eve, Tim?

Still no word on recovering the hundreds of millions paid to the CEOs who created this mess.

COUNT 4: He's too cozy with certain banks.

Remember those call logs when he first started... 80 contacts with Goldman Sachs, JP Morgan, and CitiGroup CEOs in just 7 months!

But Bank of America's CEO only got three calls. Apparently Bank of America is not one of Geithner's favorites, especially when you consider that there are still many unanswered questions about Tim Geithner's role in threatening to fire Bank of America management if they didn't go through with a deal to buy Merrill lynch.

COUNT 5: TARP Special Investigator Neil Barofsky's report says Geithner's New York Fed overpaid the big banks through AIG by billions of dollars.

Geithner says it had to be done. Maybe so, maybe not, but this takes us to our final point.

Since then, the Treasury Secretary has yet to really prove whose side he's on -- the Wall Street big wigs or the American taxpayer? Here's the litmus test: Mr. Geithner, show us the past ten years of AIG emails or step down so that we can get somebody who will. A crime has been committed against the American taxpayer and right now you are standing at the door of the crime scene refusing to let anyone in.

Show us you're not involved Mr. Geithner, prove the white house correct in defending you. All we are asking for is the transparency promised by the President you serve.

Follow Dylan Ratigan on Twitter: www.twitter.com/DylanRatigan

The Other Plot to Wreck America

By FRANK RICH, NY Times

Published: January 9, 2010

THERE may not be a person in America without a strong opinion about what coulda, shoulda been done to prevent the underwear bomber from boarding that Christmas flight to Detroit. In the years since 9/11, we’ve all become counterterrorists. But in the 16 months since that other calamity in downtown New York — the crash precipitated by the 9/15 failure of Lehman Brothers — most of us are still ignorant about what Warren Buffett called the “financial weapons of mass destruction” that wrecked our economy. Fluent as we are in Al Qaeda and body scanners, when it comes to synthetic C.D.O.’s and credit-default swaps, not so much.

What we don’t know will hurt us, and quite possibly on a more devastating scale than any Qaeda attack. Americans must be told the full story of how Wall Street gamed and inflated the housing bubble, made out like bandits, and then left millions of households in ruin. Without that reckoning, there will be no public clamor for serious reform of a financial system that was as cunningly breached as airline security at the Amsterdam airport. And without reform, another massive attack on our economic security is guaranteed. Now that it can count on government bailouts, Wall Street has more incentive than ever to pump up its risks — secure that it can keep the bonanzas while we get stuck with the losses.

The window for change is rapidly closing. Health care, Afghanistan and the terrorism panic may have exhausted Washington’s already limited capacity for heavy lifting, especially in an election year. The White House’s chief economic hand, Lawrence Summers, has repeatedly announced that “everybody agrees that the recession is over” — which is technically true from an economist’s perspective and certainly true on Wall Street, where bailed-out banks are reporting record profits and bonuses. The contrary voices of Americans who have lost pay, jobs, homes and savings are either patronized or drowned out entirely by a political system where the banking lobby rules in both parties and the revolving door between finance and government never stops spinning.

It’s against this backdrop that this week’s long-awaited initial public hearings of the Financial Crisis Inquiry Commission are so critical. This is the bipartisan panel that Congress mandated last spring to investigate the still murky story of what happened in the meltdown. Phil Angelides, the former California treasurer who is the inquiry’s chairman, told me in interviews late last year that he has been busy deploying a tough investigative staff and will not allow the proceedings to devolve into a typical blue-ribbon Beltway exercise in toothless bloviation.

He wants to examine the financial sector’s “greed, stupidity, hubris and outright corruption” — from traders on the ground to the board room. “It’s important that we deliver new information,” he said. “We can’t just rehash what we’ve known to date.” He understands that if he fails to make news or to tell the story in a way that is comprehensible and compelling enough to arouse Americans to demand action, Wall Street and Washington will both keep moving on, unchallenged and unchastened.

Angelides gets it. But he has a tough act to follow: Ferdinand Pecora, the legendary prosecutor who served as chief counsel to the Senate committee that investigated the 1929 crash as F.D.R. took office. Pecora was a master of detail and drama. He riveted America even without the aid of television. His investigation led to indictments, jail sentences and, ultimately, key New Deal reforms — the creation of the Securities and Exchange Commission and the Glass-Steagall Act, designed to prevent the formation of banks too big to fail.

As it happened, a major Pecora target was the chief executive of National City Bank, the institution that would grow up to be Citigroup. Among other transgressions, National City had repackaged bad Latin American debt as new securities that it then sold to easily suckered investors during the frenzied 1920s boom. Once disaster struck, the bank’s executives helped themselves to millions of dollars in interest-free loans. Yet their own employees had to keep ponying up salary deductions for decimated National City stock purchased at a heady precrash price.

Trade bad Latin American debt for bad mortgage debt, and you have a partial portrait of Citigroup at the height of the housing bubble. The reckless Citi executives of our day may not have given themselves interest-free loans, but they often walked away with the short-term, illusionary profits while their employees were left with shredded jobs and 401(k)’s. Among those Citi executives was Robert Rubin, who, as the Clinton Treasury secretary, helped repeal the last vestiges of Glass-Steagall after years of Wall Street assault. Somewhere Pecora is turning in his grave

Rubin has never apologized, let alone been held accountable. But he’s hardly alone. Even after all the country has gone through, the titans who fueled the bubble are heedless. In last Sunday’s Times, Sandy Weill, the former chief executive who built Citigroup (and recruited Rubin to its ranks), gave a remarkable interview to Katrina Brooker blaming his own hand-picked successor, Charles Prince, for his bank’s implosion. Weill said he preferred to be remembered for his philanthropy. Good luck with that.

Among his causes is Carnegie Hall, where he is chairman of the board. To see how far American capitalism has fallen, contrast Weill with the giant who built Carnegie Hall. Not only is Andrew Carnegie remembered for far more epic and generous philanthropy than Weill’s — some 1,600 public libraries, just for starters — but also for creating a steel empire that actually helped build America’s industrial infrastructure in the late 19th century. At Citi, Weill built little more than a bloated gambling casino. As Paul Volcker, the regrettably powerless chairman of Obama’s Economic Recovery Advisory Board, said recently, there is not “one shred of neutral evidence” that any financial innovation of the past 20 years has led to economic growth. Citi, that “innovative” banking supermarket, destroyed far more wealth than Weill can or will ever give away.

Even now — despite its near-death experience, despite the departures of Weill, Prince and Rubin — Citi remains as imperious as it was before 9/15. Its current chairman, Richard Parsons, was one of three executives (along with Lloyd Blankfein of Goldman Sachs and John Mack of Morgan Stanley) who failed to show up at the mid-December White House meeting where President Obama implored bankers to increase lending. (The trio blamed fog for forcing them to participate by speakerphone, but the weather hadn’t grounded their peers or Amtrak.) Last week, ABC World News was also stiffed by Citi, which refused to answer questions about its latest round of outrageous credit card rate increases and instead e-mailed a statement blaming its customers for “not paying back their loans.” This from a bank that still owes taxpayers $25 billion of its $45 billion handout!

If Citi, among the most egregious of Wall Street reprobates, feels it can get away with business as usual, it’s because it fears no retribution. And it got more good news last week. Now that Chris Dodd is vacating the Senate, his chairmanship of the Banking Committee may fall next year to Tim Johnson of South Dakota, home to Citi’s credit card operation. Johnson was the only Senate Democrat to vote against Congress’s recent bill policing credit card abuses.

Though bad history shows every sign of repeating itself on Wall Street, it will take a near-miracle for Angelides to repeat Pecora’s triumph. Our zoo of financial skullduggery is far more complex, with many more moving pieces, than that of the 1920s. The new inquiry does have subpoena power, but its entire budget, a mere $8 million, doesn’t even match the lobbying expenditures for just three banks (Citi, Morgan Stanley, Bank of America) in the first nine months of 2009. The firms under scrutiny can pay for as many lawyers as they need to stall between now and Dec. 15, deadline day for the commission’s report.

More daunting still is the inquiry’s duty to reach into high places in the public sector as well as the private. The mystery of exactly what happened as TARP fell into place in the fateful fall of 2008 thickens by the day — especially the behind-closed-door machinations surrounding the government rescue of A.I.G. and its counterparties. Last week, a Republican congressman, Darrell Issa of California, released e-mail showing that officials at the New York Fed, then led by Timothy Geithner, pressured A.I.G. to delay disclosing to the S.E.C. and the public the details on the billions of bailout dollars it was funneling to its trading partners. In this backdoor rescue, taxpayers unknowingly awarded banks like Goldman 100 cents on the dollar for their bets on mortgage-backed securities.

Why was our money used to make these high-flying gamblers whole while ordinary Americans received no such beneficence? Nothing less than complete transparency will connect the dots. Among the big-name witnesses that the Angelides commission has called for next week is Goldman’s Blankfein. Geithner, Henry Paulson and Ben Bernanke should be next.

If they all skate away yet again by deflecting blame or mouthing pro forma mea culpas, it will be a sign that this inquiry, like so many other promises of reform since 9/15, is likely to leave Wall Street’s status quo largely intact. That’s the ticking-bomb scenario that truly imperils us all.

The degrading effects of terrorism fears

"A citizenry drowning in fear and fixated on Safety to the exclusion of other competing values can only be degraded and depraved."

John Adams, in his 1776 Thoughts on Government, put it this way: "Fear is the foundation of most governments; but it is so sordid and brutal a passion, and renders men in whose breasts it pred...ominates so stupid and miserable, that Americans will not be likely to approve of any political institution which is founded on it."

(updated below - Update II)

I never thought I'd hear myself say this, but David Brooks actually had an excellent column in yesterday's New York Times that makes several insightful and important points. Brooks documents how "childish, contemptuous and hysterical" the national reaction has been to this latest terrorist episode, egged on -- as usual -- by the always-hysterical American media. The citizenry has been trained to expect that our Powerful Daddies and Mommies in government will -- in that most cringe-inducing, child-like formulation -- Keep Us Safe. Whenever the Government fails to do so, the reaction -- just as we saw this week -- is an ugly combination of petulant, adolescent rage and increasingly unhinged cries that More Be Done to ensure that nothing bad in the world ever happens. Demands that genuinely inept government officials be held accountable are necessary and wise, but demands that political leaders ensure that we can live in womb-like Absolute Safety are delusional and destructive. Yet this is what the citizenry screams out every time something threatening happens: please, take more of our privacy away; monitor more of our communications; ban more of us from flying; engage in rituals to create the illusion of Strength; imprison more people without charges; take more and more control and power so you can Keep Us Safe.

This is what inevitably happens to a citizenry that is fed a steady diet of fear and terror for years. It regresses into pure childhood. The 5-year-old laying awake in bed, frightened by monsters in the closet, who then crawls into his parents' bed to feel Protected and Safe, is the same as a citizenry planted in front of the television, petrified by endless imagery of scary Muslim monsters, who then collectively crawl to Government and demand that they take more power and control in order to keep them Protected and Safe. A citizenry drowning in fear and fixated on Safety to the exclusion of other competing values can only be degraded and depraved. John Adams, in his 1776 Thoughts on Government, put it this way:

Fear is the foundation of most governments; but it is so sordid and brutal a passion, and renders men in whose breasts it predominates so stupid and miserable, that Americans will not be likely to approve of any political institution which is founded on it.

As Adams noted, political leaders possess an inherent interest in maximizing fear levels, as that is what maximizes their power. For a variety of reasons, nobody aids this process more than our establishment media, motivated by their own interests in ratcheting up fear and Terrorism melodrama as high as possible. The result is a citizenry far more terrorized by our own institutions than foreign Terrorists could ever dream of achieving on their own. For that reason, a risk that is completely dwarfed by numerous others -- the risk of death from Islamic Terrorism -- dominates our discourse, paralyzes us with fear, leads us to destroy our economic security and eradicate countless lives in more and more foreign wars, and causes us to beg and plead and demand that our political leaders invade more of our privacy, seize more of our freedom, and radically alter the system of government we were supposed to have. The one thing we don't do is ask whether we ourselves are doing anything to fuel this problem and whether we should stop doing it. As Adams said: fear "renders men in whose breasts it predominates so stupid and miserable."

What makes all of this most ironic is that the American Founding was predicated on exactly the opposite mindset. The Constitution is grounded in the premise that there are other values and priorities more important than mere Safety. Even though they knew that doing so would help murderers and other dangerous and vile criminals evade capture, the Framers banned the Government from searching homes without probable cause, prohibited compelled self-incrimination, double jeopardy and convictions based on hearsay, and outlawed cruel and unusual punishment. That's because certain values -- privacy, due process, limiting the potential for abuse of government power -- were more important than mere survival and safety. A central calculation of the Constitution was that we insist upon privacy, liberty and restraints on government power even when doing so means we live with less safety and a heightened risk of danger and death. And, of course, the Revolutionary War against the then-greatest empire on earth was waged by people who risked their lives and their fortunes in pursuit of liberty, precisely because there are other values that outweigh mere survival and safety.

These are the calculations that are now virtually impossible to find in our political discourse. It is fear, and only fear, that predominates. No other competing values are recognized. We have Chris Matthews running around shrieking that he's scared of kung-fu-wielding Terrorists. Michael Chertoff is demanding that we stop listening to "privacy ideologues" -- i.e., that there should be no limits on Government's power to invade and monitor and scrutinize. Republican leaders have spent the decade preaching that only Government-provided Safety, not the Constitution, matters. All in response to this week's single failed terrorist attack, there are -- as always -- hysterical calls that we start more wars, initiate racial profiling, imprison innocent people indefinitely, and torture even more indiscriminately. These are the by-products of the weakness and panic and paralyzing fear that Americans have been fed in the name of Terrorism, continuously for a full decade now.

Ever since I began writing in late 2005 about this fear-addicted dynamic, the point on which Brooks focused yesterday is the one I've thought most important. What matters most about this blinding fear of Terrorism is not the specific policies that are implemented as a result. Policies can always be changed. What matters most is the radical transformation of the national character of the United States. Reducing the citizenry to a frightened puddle of passivity, hysteria and a child-like expectation of Absolute Safety is irrevocable and far more consequential than any specific new laws. Fear is always the enabling force of authoritarianism: the desire to vest unlimited power in political authority in exchange for promises of protection. This is what I wrote about that back in early 2006 in How Would a Patriot Act?:

The president's embrace of radical theories of presidential power threatens to change the system of government we have. But worse still, his administration's relentless, never-ending attempts to keep the nation in a state of fear can also change the kind of nation we are.

This isn't exactly new: many of America's most serious historical transgressions -- the internment of Japanese-Americans, McCarthyite witch hunts, World War I censorship laws, the Alien and Sedition Act -- have been the result of fear-driven, over-reaction to external threats, not under-reaction. Fear is a degrading toxin, and there's no doubt that it has been the primary fuel over the last decade. As the events of the last week demonstrate, it continues to spread rapidly, and it produces exactly the kind of citizenry about which John Adams long ago warned.

UPDATE: Talking to one's friends and co-workers is not a reliable way of gauging public opinion on an issue. Those who want to claim that the media's hysteria over this incident is not matched by the general public's are going to have to explain this:

Fifty-eight percent (58%) of U.S. voters say waterboarding and other aggressive interrogation techniques should be used to gain information from the terrorist who attempted to bomb an airliner on Christmas Day. . . . Seventy-one percent (71%) of all voters think the attempt by the Nigerian Muslim to blow up the airliner as it landed in Detroit should be investigated by military authorities as a terrorist act. Only 22% say it should be handled by civilian authorities as a criminal act, as is currently the case.

Does that sound like a calm and sober citizenry?

UPDATE II: On Fox News yesterday, Lt. Gen. Thomas McInerney (ret.) announces that he wants to strip search all Muslim males between the ages of 18-28, and explains that "political correctness" -- the only possible reason one might have to object to such a proposal -- is going to result in our mass slaughter at the hands of jihadists. It's hard to overstate -- or even fathom -- what happens to people who have sat there for years and ingested this sort of ugliness and panic.